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LogisticsTimes www.logisticstimes.net

POLICY WATCH SLOWDOWN & POLITICS

NDIA'S MOST VALUED LOGISTICS MAGAZINE

September 2013

INDUSTRY FORUM CURRENCY CRISIS

INTERVIEW SUUNIL DABRAL

` 50 Logistics Times

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Manufacturer

Consumer

The Reverse Game Poised to get interesting

Consumers in India are returning products worth $ 12 billion to manufacturers every year.

Does it entail reverse logistics taking off in a major way in not so distant future?

Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 4: Issue No.5 * September 2013 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution Legal Advisor

Kamruddin Saifi Rakesh Garg

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COVER FEATURE

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net

Bangalore

B Shekhar shekhar@logisticstimes.net

N Raju Chennai

raju@logisticstimes.net Sudhir Kumar

Hyderabad

sudhir@logisticstimes.net

Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Pawanexh Kohli Principal Advisor, Cross Tree Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

Marketing & Sales Kalika Singh Ph: 011-22478538-39, 9891007542 Email: advt@logisticstimes.net Printer & Publisher Deepa Misra for

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Manufacturer

Consumer

The Reverse Game Poised to get interesting Edit Note

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News Briefs

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Product

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Event

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16 POLICY WATCH Politics in the time of slowdown

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INTERVIEW

Suunil Dabral Country Head, Schaeffer

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Currency Crisis

Right Courses

INDUSTRY FORUM

EDUCATION

EDIT NOTE

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The multi-dimensional reverse game The numbers are simply staggering. In the US alone, products (common items which are part of everyday’s life) worth a whooping $300 billion are returned back to the manufacturers every year. The consumers whether simple households or retailers who buy in bulk from the manufacturers return the product for myriads of reasons. The reverse process can even be triggered by as simple a reason as the consumer not liking the colour of the product when it is finally handed over to him. In the matured economies, this return game has become a huge business over the decades resulting in emergence of global specialists who are taking care of the contrarian flow of goods. Global experience has shown that managing the return game can’t be everybody’s cup of tea since the operational dynamics are different.

The slowdown of the economy in recent years notwithstanding, e-tailing business in the country has grown significantly and this return game has also begun finding big-ticket expression in the domestic market. According to an estimate, goods worth $12-15 billion are being pushed back to the manufacturers in the country every year - a segment which is consistently growing at a fast pace. Does it entail that this segment would soon see cropping up of a set of specialists in the country? Hitendra Chaturvedi, MD and Founder of Greendust responds to this core issue alongwith other related dimensions of the reverse supply chain business in the cover feature penned by him. There are a couple of interesting takeaways: Indian LSPs who like anywhere else mostly specialize in forward movement of goods too can be part of the action by aligning with the select few players in the reverse supply chain; it will be a while before global specialists really step in aggressively and that a reverse supply chain specialist also has the avenue to operate factory seconds outfit. Simply put, the reverse supply chain is a story which is poised to get more interesting going ahead.

As if the sluggish growth and high inflation and interest rates were not enough, the currency crisis in the recent months with the Rupee devaluating to its all time low has only added to the woes of India Inc. Like other segments of the economy, the logistics industry too is facing the heat as senior representatives point out in this edition. With transportation accounting for over 60 percent of total logistics cost, the rise in fuel prices as a direct offshoot of the rupee decline has further pushed them to the wall. Burdening your client with anykind of incremental cost in the time of slowdown afterall is not a strategy you would ever like to resort.

Another interesting feature of this edition is the interview with Suunil Dabral, country head of SSI Schaefer. This over 70 year old global automation major is somewhat grappling with its image in Asia (including India) wherein its non-automation expertise is believed to be its mainstay.

Waiting for your response Ritwik Sinha ritwik@logisticstimes.net

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Rail freight tariff to be hiked

The rail freight tariff would be hiked dynamically from October 1 onwards considering the global oil prices, minister of state for Railways, Adhir Ranjan Chowdhury said at an industry association event in New Delhi recently.

“In the budget it was proposed that due to rising diesel prices, the rail freight tariff will be hiked at the end of six months period as such from October 1 the rail fare would be increased in a very dynamic way,” said Chowdhury.

Conceding that Indian Railways is facing acute shortage of funds, the minister invited private sector participation

in the railways sector in a big way. “Till date we’ve failed to allure private investments in the railways segement, while there is private investment in telecom sector to the extent of 82 per cent, in ports it is about 80 per cent and in roads sector it is 16 per cent but in railways it is still almost negligible,” Chowdhury said. “The industry should be a little liberal in their investment in the railways infrastructure in India as it plays an important role in growth of Indian economy and country’s overall infrastructure.”

The minister also said that India needs to take cue from China which has made tremendous progress in the railways infrastructure. “China has made phenomenal growth in railways infrastructure and we’ve many things to emulate from their experience,” he commented.

He also emphasized on the need for more innovation in view of the future demands of Indian Railways as railway projects are capital intensive and have long gestation period.

He further said that modernization is imperative for Indian Railways for which the ministry has set up Sam Pitroda committee which has recommended plethora of measures and suggested Rs 5.6 lakh crore for modernization. “This massive fund required cannot be mobilized by the Indian Railways on its own and so we need significant support from the industry,” he concluded.

Investment projects in limbo A staggering 43 per cent of total investment projects worth a humongous Rs 52 lakh crore attracted by states across India remained non-starter as of March 2013. While over 34 per cent of these investments are stuck at the stage of announcement, implementation of about six per cent of projects has been stalled and there is no information of the remaining (three per cent) projects, apex industry body ASSOCHAM maintained in a recently released analysis paper.

“Investments worth over Rs 69.5 lakh crore i.e. just about 57 per cent of the total investments of over Rs 122 lakh crore attracted from various public and private sources are under implementation stage as of March 2013,” according to an analysis of investments carried out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“These dismal figures showcase that owing to prevalence of global recessionary trends and slowdown of Indian economy investments across states have been kept on hold which is worrisome for a country that desperately needs investments,” said D.S. Rawat, national secretary general of ASSOCHAM while releasing the analysis.

LOGISTICS TIMES September 2013

Inadequate addressal of project induced displacement, failure of implementation of Resettlement and Rehabilitation (R&R) policies, environmental clearances, bureaucratic delays, lack of clear cut policies and others have been contributing to lower implementation rates of investment projects in India, further highlighted the ASSOCHAM analysis.

With over 82 per cent of investment projects under implementation, Haryana has recorded highest rate of implementation of investments amid industrialized states throughout India. Jammu and Kashmir (81.4 per cent), Punjab (79 per cent), Assam (72 per cent) and Chhattisgarh (69 per cent) are amid top five states that are currently witnessing a high rate of implementation of investments, according to the ASSOCHAM analysis.

Gujarat has recorded lowest implementation rate as over half of the total investment projects remain non-starter and just about 46 per cent of projects are under the implementation stage. Amid other industrialized states, Rajasthan, Madhya Pradesh, Karnataka, West Bengal, Tamil Nadu and Jharkhand have recorded lower rates of implementation.

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MEDIA PARTNER

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Signs of recovery?

India’s exports rose to a two year high of 13 percent in August on account of improved global situation, enabling trade deficit to fall to a four month low of USD 11 billion, aided by subdued gold imports.

Gold imports, which has been pushing up current account deficit and putting pressure on rupee, dipped to USD 0.65 billion in August from USD 2.2 billion in the previous month.

Exports, for the second month in a row, increased by 12.97 percent to USD 26.14 billion, while imports declined by 0.68 percent to USD 37 billion.

“Things are improving in

Europe and in the US also economic condition is better. So signs of stability in the major economies including the UK and the positive growth in the US will lead to increase in demand,” Commerce and Industry Minister Anand Sharma told reporters. During April-August, exports were up by 3.89 percent at USD 124.42 billion. Imports too grew by 1.72 percent to USD 197.79 billion, leaving a trade deficit of USD 73.36 billion. Oil imports in August grew by 17.88 percent to USD 15.1 billion.

The last time trade deficit had narrowed substantially was in March when it touched USD 10.3 billion.

Meanwhile, deviating from a nine-month streak of decline, domestic passenger car sales grew by 15.37 percent to 1,33,486 units in August this year, compared to 1,15,705 units in the same month last year. Industry body Society of Indian Automobile Manufacturers (SIAM), however, played down the feat saying the growth was mainly due to low base effect.

Rs. 700 crore EPCC order from BPCL Essar Projects Limited (EPL), a Global EPC (Engineering, Procurement, Construction) company headquartered in Dubai, recently announced securing a contract valued at approx. Rs 700 crores from Bharat Petroleum Corporation Limited (BPCL). The order is for Engineering Procurement Construction and Commissioning/ Commissioning Assistance (EPCC) of the Coke Drum Structure Package (CDSP) of the Delayed Coker Unit (DCU) at the BPCL Kochi Refinery for the Integrated Refinery Expansion Project On bagging this project Alwyn Bowden – President & CEO - Essar Projects Limited said, “This is the second award from BPCL this year, reinforcing our commitment to our key customers as we continue to deliver value to their operations.”

The scope of work includes project management, residual process design, detailed engineering, procurement, fabrication, construction, commissioning, and performance testing of the Coke Drum Structure Package (CDSP) of Delayed Coker Unit for the Client, BPCL. On the occasion Amit Gupta- CEO, Hydrocarbon SBUEssar Projects Limited said, “This is the third Coker Unit that Essar Project’s Hydrocarbon SBU would have setup and this contract is the single largest package of the BPCL Kochi Integrated Refinery Expansion Project.”

LOGISTICS TIMES September 2013

Bharat Petroleum Corporation Limited (BPCL) – Kochi Refinery is in the process of expanding the refinery facilities from 9.5 to 15.5 MMTPA as part of Integrated Refinery Expansion Project (IREP) for which Engineers India Limited (EIL) has been appointed as Project Management Consultant (PMC).

The DCU has a capacity of 3.84 MMTPA and the process licensor for the unit is M/s. CB&I- Lummus Technology.

The overall project schedule for this project is 27 months, including commissioning.

Four laning of Kaithal-Rajasthan Border

The Cabinet Committee on Economic Affairs recently gave its approval for four laning of the Kaithal-Rajasthan border section of National Highway-152/65 in the state of Haryana under the National Highways Development Project (NHDP) Phase IV, on Design, Build, Finance, Operate and Transfer (BOT/DBFOT) basis in Build-Operate-Transfer (BOT) (Toll) mode of delivery.

The cost is estimated to be Rs.2029.49 crore including Rs. 636.49 crore towards the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities. The total length of the road will be approximately 166 kms.

The project will expedite improvement of infrastructure in the state of Haryana and also reduce the time and cost of travel for traffic, particularly heavy traffic, plying between the Kaithal-Rajasthan border. This road stretch connects Ambala with important towns such as Kaithal, Barwala, Hisar upto the Rajasthan border. The project road is part of NH-65 from Kaithal-Rajasthan border. It also provides connectivity to NH-10. Development of this stretch will also help in uplifting the socio-economic condition of this region of the state of Haryana. It will also increase employment potential for local labourers for project activities.

Partnership for Door Step Payments

YES BANK, India’s fourth largest private sector bank has further simplified the e-Commerce, Cash on Delivery platform through its Mobile Point of Sales (MPOS) mechanism. The YES BANK – MPOS has proven extremely beneficial for Blue Dart, South Asia’s premier express air and integrated transportation & distribution company, and a differentiated solution provider for all merchandise delivery offerings from e-tailing companies in the country.

The Home Delivery Model of e-tailing with “Cash on Delivery” as the USP has seen tremendous growth in last few years. However, it carries the inherent risk of fraud, counterfeit, mutilation and theft which increase the operational cost of the company. YES BANK - MPOS is a first of its kind payment mechanism that uses mobile device

based GPRS connectivity to facilitate debit/credit card payments. This unique device when connected to any mobile device can be used as a POS terminal to facilitate card payments.

BLUE DART being the pioneer of the “Cash on Delivery” model with coverage to over 32,757 locations and the preferred solution provider for the country’s leading e-tailers was the obvious choice in that segment to test this solution in a live environment.

Asit Oberoi, COO, YES BANK said, “YES BANK is pleased to have partnered with Blue Dart to offer a simple yet innovative mechanism towards payments collections in the country. Blue Dart & YES BANK have successfully piloted this solution in major cities across India. This solution is the first of its kind in India and considering Blue Dart’s market share, will change the dynamics of the e-commerce business in India. At YES BANK, we strive to build strong customer-oriented systems with superior technological backing.”

Yogesh Dhingra, COO & Finance Director, Blue Dart Express. commented, “As a technological knowledge leader for the industry in the country, we have always had a first mover advantage and have pioneered several Best Demonstrated Practices replicated by the industry. This solution from YES BANK was an ideal fit in our delivery system and another opportunity to add to customer delight / convenience / reliability which are the core essence of all our initiatives.”

YES BANK’s MPOS offers multiple benefits to merchants that require home delivery services for payments collection including retailers, insurance agents, restaurant delivery chains and e-commerce platforms among others.

LOGISTICS TIMES September 2013

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Growing in a difficult market Global freight forwarder and logistics services provider Damco reported total revenues of USD 1,531 million for the first half of 2013 and a post tax operating loss of USD 2 million (Net Operating Profit After Tax).

Underlying EBITA before special items in the first half of 2013 was USD 24 million, compared to USD 34 million in the same period last year. This was slightly less than anticipated, caused by higher-than-planned costs to strengthen and prepare the organization for the future in a number of the growth markets.

Year-on-year growth remains healthy with air freight volumes significantly up (+14%), outperforming the market. Supply chain management volumes grew a very solid 10% whilst sea freight volumes contracted slightly (-1%).

“In weak markets, we continue to invest in building the future with special focus on expanding our geographical coverage and rolling out our new global freight management system” commented CEO Rolf Habben-Jansen.

“This is needed to enable future growth and to optimize our cost

to serve. We will start seeing the benefits from this later this year and expect to see solid year-on-year improvements in the results from Q4 2013 onwards” he added.

In the upcoming quarters Damco does not anticipate a major improvement in the market situation. According to a company release, it will remain fully focused on further improving and extending the services to customers to enable them to continue to grow further with Damco and on starting to capture the significant planned benefits from the investments made in the last quarters to boost efficiency.

New logistics center for CEVA

CEVA Logistics last month announced the start of operations for its new logistics center in Singapore, located strategically in the eastern part of the island with easy access to the expressways, airport and major seaports.

CEVA’s new logistics center is housed in the 42,000 sq m state-of-the art multi-user warehouse facility located at Tampines Logis Park.This new logistics center is the signature facility for CEVA in the Asia Pacific region to showcase its commitment to sustainability with LEED (Leadership in Energy and Environmental Design) certification and advanced eco-design features for environmental efficiency.

CEVA is one of the first 3PL companies in Singapore LOGISTICS TIMES September 2013

to achieve the highest level of LEED Platinum accreditation.

Loo Seng Tak, CEVA’s Executive Vice President for South East Asia said: “Singapore is a strategic regional hub for CEVA due to the country’s excellent network and international connectivity. This new logistics center, with the highest green credentials, will enhance our service capabilities to better serve our customers, many of whom have regional operations in Singapore, to meet their supply chain needs. This is a significant investment that strengthens our presence in this market and enables us to offer more innovative supply chain solutions to our customers.”

This is a single hub with a multi user concept designed to deliver a range of tangible benefits through economies of scale, shared overheads, resources, equipment and best practice processes for customers from various sectors.

Among confirmed customers for the site are leading companies such as Rolls-Royce plc, Pearson, the world’s leading learning company, and Pigeon, a leading provider of baby and child care products.

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POLICY WATCH

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Politics in the Time of Slowdown “The depreciation of the rupee and rise in dollar prices of petroleum products will no doubt lead to some further upward pressure on prices…We have the more difficult reforms to do such as reduction of subsidies…”

Manmohan Singh in the Lok Sabha

Himanshu Shekhar

LOGISTICS TIMES September 2013

Prime Minister Manmohan Singh consciously chose to flag the growing concern in the Oil industry over the ramifications of war clouds hanging over Syria. As he appeared before the Lok Sabha to clarify his government’s strategy to deal with the rising uncertainty over the fate of the economy, his intention was clear: the common man must get ready to bear the brunt of the uncertainty which was looming large on the economy. His political message was clear: the falling value of the rupee and the rising oil import bill were all set to change the contours of the economy and the government was not in a position to sustain the rising burden of oil subsidy.

As I write this column, pressure is mounting on the Petroleum Minister to approve another hike in diesel prices.

Veerappa Moily made this clear when he wrote to Prime Minister on 30th August: “I would like to bring to your kind notice that the consistent rupee depreciation has a severe impact on the under-recovery of the Oil Marketing Companies…If the present position persists, the total under-recovery would reach a level of Rs.1,80,000 crore in the current financial year as compared to Rs.1,61,000 crore during the financial year 2012-13”.

It had an underlying message: the cost of essential petroleum and other consumer products was set to increase following the significant decline in the value of Rupee and the rising cost of crude oil following tensions in Syria.

It meant that middle class must now get ready to pay more for essential commodities in the coming days. What was missing in the PM’s speech was how the government planned to cushion

the middle class from the ill effects of rising uncertainty in the economy.

But the Manmohan Singh Government was not oblivious to the interests of hundreds of millions of poor, underprivileged and the farmers. In fact, the just concluded Monsoon Session of Parliament was a testimony to the political strategy of the UPA. The ruling coalition chose to expend most of its energy on building up political consensus on the ambitious Food Security Bill and the “The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012”. The political agenda was clear: to create the feel-good sentiment among the poor, the rural farming community and the under-privileged.

Congress President Sonia Gandhi made this amply clear in her first speech in Parliament in last eight years: "There are people who ask whether we have the means to implement this scheme. I would like to say that we have to figure out the means. The question is not whether we can do it or not. We have to do it". (26th August, 2013; Lok Sabha) In fact, despite a high Current Account Deficit and a slowing economic growth rate, the UPA Government argued in Parliament that it could bear the additional burden which would accrue because of the food subsidy bill, which is expected to cost Rs. 1.25 lakh crore in a year as per its own estimates, but significantly higher as per other economists.

The government did not stop there.

It went ahead and cobbled a deal with Opposition parties to get the new land acquisition bill passed in both the Houses of Parliament. It was aimed to ensure that millions of farmers

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POLICY WATCH

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and land-owners a better price for their land. The desperation to send a political message was clear.

The Rural Development Ministry issued a detailed press note (4th September) highlighting how this Bill would protect the interests and concerns of the SCs and STs even when the discussion had not even started in Lok Sabha: “The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012 has a separate Chapter to protect the interests of tribals and those belonging to the Scheduled Castes…

The Bill stipulates that as far as possible no acquisition shall take place in the Scheduled Areas”.

The government chose to ignore the concerns of the Industry at a time when there is a slowdown, costs of raising funds for new investments are rising and an environment of uncertainty is looming large over the economy.

This was done despite growing opposition from the industry. Industry associations have long argued that

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this Bill would increase the input cost and make it difficult to do business in India. But the government chose to ignore the concerns of the Industry

at a time when there is a slowdown in the economy, costs of raising funds for new investments are rising and an environment of uncertainty is looming large over the economy.

With barely two months left for the next round of crucial assembly elections in five states and just seven months before the country goes to the next general elections, the Prime Minister knows he has to further realign the priorities of his government with Congress party’s political ambitions. And he seems to be working on just that!

The author is a senior journalist workig with NDTV.

Currency crisis & impact on logistics business

Indian rupee vis-a-vis US dollor has been on an extreme form of roller-coaster ride since the beginning of the year, particularly in last three months. Though it recovered a bit in the first week of September, representatives of the logistics industry point out that extreme fluctuation of the India currency has made life difficult for them as well, particularly its cascading impact on fuel prices. Here are some views: LOGISTICS TIMES September 2013

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Anil Khanna MD, Blue Dart I couldn’t help smiling the other day looking at my phone, when a friend forwarded a jibe – who would reach the 100-mark first – onion, petrol or Rupee. But the state of affairs have reached such a point that no one is really smiling. The strong headwinds faced by the Indian economy such as slowing GDP, spiraling commodity prices (crude and gold), falling investor confidence in domestic and FII, consistently high inflation rate coupled with high interest rates for commercial borrowings, widening trade deficit and the falling rupee are the key factors that affect express delivery and courier industry.

Devaluation of the rupee has hit businesses hard and most companies are cutting corners in every possible way. A weakening currency makes companies pay more for imports and when they pass this to consumers, prices rise. While growth parameters are looking precarious, we are staring at huge inflation that will lead to high interest rates creating a vicious cycle. While measures are being taken to arrest the fall, ranging from tightening liquidity to bringing in partial capital controls to curb the outflow of the dollar, I feel these are short-term fixes and the focus should be more on saving the economy. Markets purely work on expectations and we need to win back investors confidence to stabilize the financial markets and boost economic activities.

India imports 80% of its oil demand and the situation is equally dismal on this front with the rising international crude oil prices, the sharp depreciation in the rupee and the latest Syrian issue. Since petrol is fully and diesel is partially decontrolled, oil marketing companies are free to hike their retail prices in tandem with the import-linked prices. This has a cascading impact leading to increase in transportation cost of goods from one part of the country to another that inevitably adds up to the cost price of the end product. Blue Dart has a presence in ground express and has a fleet of 7,744 vehicles supporting the network. An increased fuel bill due to the devalued rupee is eating into the profitability of this segment.

In the air express industry, the cost of Aviation Turbine Fuel (ATF) constitutes a major component of the cost of operations for the industry. ATF price with its high price volatility and multiple rates across states due to different tax rates directly impacts operating margins and constitute more than 20% of our total cost depending upon the network / type of fleet. Blue Dart being the only dedicated cargo freighter organization in the country with a fleet of a Boeing 737 and five Boeing freighters, with even a 10% rise in ATF impacts our profitability. Rupee depreciation impacts the aviation LOGISTICS TIMES September 2013

industry badly as over 70% costs are in US dollars. However, the dollar has impacted us not only through ATF but also lead to an overall increase in cost on all fronts like aircraft lease and maintenance, associated overheads like petrol and diesel, computer and software licenses, annual maintenance contracts (AMC) and other allied input costs. To neutralize the impact of ATF costs and related aviation costs, we have a transparent and customer-friendly fuel surcharge mechanism in place since December 2002 and this has enabled us to mitigate the phenomenal increase in costs.

Blue Dart partners its customer’s businesses and is today the preferred choice across industry verticals. Customers work with Blue Dart due to the strategic competitive advantage it

The strong headwinds faced by the Indian economy such as slowing GDP, spiraling commodity prices (crude and gold), falling investor confidence in domestic and FII, consistently high inflation rate, widening trade deficit and the falling rupee are the key factors that affect express delivery and courier industry. brings to their businesses in order to enable them to serve their customers beyond a tactical approach. As a company that is dedicated towards adding to customer profitability and value, Blue Dart has until now been absorbing all currency fluctuations without letting it impact customer’s businesses.

However, we have now reached a situation whereby we are finding it extremely difficult to absorb any further increases. Therefore, effective 1st September onwards, we also introduced CAF (Currency Adjustment Factor), another fair and customer friendly mechanism that allows mitigation against currency fluctuation.

At Blue Dart, the focus since inception has been to provide value to our customers… “To be the best and set the pace…” and that till today remains unchanged. We have always tried to pre-empt the market needs so that we are in the state of preparedness to surmount any challenge that may come our way. While we acknowledge it is a bad time for businesses, having partnered with our customers in the best of times, we will extend much larger support to them in tough times too, when it is needed more.

Devdip Purkayastha President, CHEP India “Every dark cloud has a silver lining”. Resilient businesses think long term, turn challenges into opportunities and build up during the gloom to beat the ‘doom’ and be ready to

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bloom when market conditions improve.

The depreciating rupee is well, losing out, not entirely due to ‘market conditions’. There are internal compulsions such as policy, elections and decision making ability as well as external and globally linked events such as improving economies of the developing world, tight fiscal policies and geo-political situation.

Everyone agrees that the current business climate will cause short term pain. Bottom lines will be eroded, jobs will be lost, companies, which do not have deep pockets could cease to exist. Yes, there is definitely short term pain, but we truly believe that the long term story is still good.

The Indian economy and growth as well as the logistics industry are driven by the ability to invest in infrastructure. A falling rupee is good, if the right type of foreign investment can be brought into the focused sectors. This will help to build the industry and also the economy, supporting the long term Indian growth story.

Large MNCs and organizations having holdings in the Indian

Driving down costs and internal cost leadership is the need of the hour. Not many businesses have the power to price up during a downturn.

business are increasing their stakes in these subsidiaries.

Many large multinationals as well as national companies are committing to invest big time into India. Organizations in beverage, consumer goods, capitals goods, auto and others have announced big ticket investments, in the last couple of months. They do believe in the long term Indian growth story and the pace of investment will be driven by the improvement in the macro economics.

Driving down costs and internal cost leadership is the need of the hour. Not many businesses have the power to price up during a downturn. The focus shifts internally, on better and robust processes, waste reduction in the system including labour & space resources, increasing efficiency and most importantly investing wisely.

We believe that, most manufacturing organizations should work in building robust end-to-end supply chains. This is the time, for them to collaborate, with their suppliers for inwards movement of raw material as well as their customers for outward movement of finished goods, in developing a seamless material movement and handling system. The collaboration should be around transportation, warehousing, racking, MHE and equipment like pallets and crates. This will help them reduce costs, be agile and enable scaling up when the market turns around.

The logistic industry can help deliver most of these savings and CHEP is at the forefront, in helping customers BUILD BETTER SUPPLY CHAINS TOGETHER. „ Samir Gandhi MD, Gandhi Automation Many Indian investors are losing their confidence over a free-falling rupee but I believe we should instead focus on cultivating its potential. One should increase productivity and check if the investments are made in the right areas to uplift an undervalued rupee. The bottom line is that we should not immediately react to our current account deficit. Once we start improving our productivity, the growth rate would inevitably improve, and the currency will strengthen.

We at Gandhi Automations are constantly improving our productivity by increasing the efficiency levels in our services.

More than 50 % of our clients come to us again for their recurrent industrial and loading bay equipment needs.

Our company is currently facing minor challenges due to the downfall in rupee; however the good news is for the export department of our company. Since we already have established a sprawling manufacturing facility at Bhiwandi where we manufacture our own products, we now export our ISO certified products such as Dock Levelers, Dock Shelters, Motorized Rolling Shutters, Fire Shutters, Sectional Overhead Doors, High Speed Doors, Tail Lifts, Scissor Lifts and Doors and Gates to various countries. The depreciating currency is good news for our company since a lot of our revenue is linked to the dollar.

We hold a vision of serving our customers with the best products and after sales services. Our company has been operating in the Indian market for more than 16 years now and we have seen lot of fluctuations in the market. The present unfortunate declining rupee scenario does not come in our way of keeping our customers satisfied.

We need to understand that the developing market currencies have weakened in the recent past and if that is rectified, the rupee can once again stabilise. At this LOGISTICS TIMES September 2013

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stage, India needs remarkable levels of investments.

The government should come up with stable long term policies which will in return help investors to bring in more money in the economy. Even the country’s laws should be made very clear to the potential investors, since only then much litigation will reduce and spur investments in the country. „ Aditya Gupta Zonal Business Head(North), DIESL Rupee has been on a roller coaster ride since May 2013. It has depreciated by almost 20% in last three months and if pessimistic prophecies come true, it may further depreciate by another 10%. This unprecedented and unexpected depreciation has unsettled the entire economy and business sector. Though some exporters have gained, but majority have witnessed negative impact with higher cost of inputs or higher cost of borrowing or interests.

Compared to other industries, logistics industry does not carry large exposure in USD and hence the impact has not been as severe as it is for some other industries. Nevertheless, it is not so insulated as to come out unscathed.

Following are the key areas where Rupee Deprecation has impacted Logistics Industry: a. Impact on Transportation Industry: Fuel costs form the single largest component of freight rates. Depreciating rupee has led to steep increase in Diesel prices. Fuel prices have gone up by almost 5% in last few months and there are enough indications from Government that diesel prices will go up further in the coming weeks. Fuel price impact is affecting both domestic as well as international transportation. With customers not accepting fuel related hikes or partially accepting it the margins of transportation industry have come under lot of duress. b. Gain for Ports and Shipping Lines: Sinking rupee is bringing cheer to some factions. Port operators are rejoicing. A large part of port related charges are denominated in dollars. Appreciating dollar has increased the revenue of the ports by almost 25%. Similarly all ocean freight rates, whether Imports or Exports, are quoted in Dollars. Appreciating Dollar is translating into better collection for the shipping companies though have to transfer a large part of their collections to their parent organizations. c. Rail Freight: As per indications from Railway Ministry, the rail freight rates are expected to go up in October this year. Indian Railways has linked its freight charges to fuel adjustment component (FAC), with a review mechanism LOGISTICS TIMES September 2013

set for every six months, and the FAC comes up for review in October. This will impact both, domestic transportation as well Inland Haulage Charges, for International trade. d. Impact on 3PL Industry: Except for escalation in diesel costs, 3PL industry has not been directly impacted by the deprecating rupee. However there have been a lot of indirect impacts. The users of warehousing services have been severely impacted by the devaluation of the Rupee.

Compared to other industries, logistics industry does not carry large exposure in USD and hence the impact has not been as severe as it is for some other industries.

Supply Chain Managers are under ever-increasing pressure to further reduce costs in every possible manner. Contracts are renewed with almost no annual fee increases for LSPs. Further, network consolidation is being looked at for cost optimization.3PL Industry is completely dependent on clients for its profitability and growth. With the economy growing at sluggish pace and the existing cost pressures, the growth of 3PL surely appears to be stunted for this financial year. e. Impact of Borrowings: Though logistics industry does not carry large external borrowing,whatever little money has been borrowed is resulting in higher outflow in terms of interest and installments payments.

To conclude, sinking Rupee has further added to woes of the logistics industry which has been struggling since the start of 2012. Next 15 to 18 months appear to be tough and it will continue to be a battle for survival with cost optimization, technology and value added services being the key differentiators for LSPs. „ Mithil Pai Director Finance(India), CEVA The industry in general has been adversely impacted by the slide in the rupee. India being a largely import economy, a pricier dollar has made imports dearer.

Freight management companies have been hit with falling ocean and air volumes by the general slowdown in world economies.

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While the sinking rupee is bad news for most sectors, it is great news for exporters. They are now more competitive in the international market and their dollars are fetching them more rupees driving margins. The increased export volumes have to an extent been filling up for the lower import volumes for the logistics industry. Also ports, whose vessel related charges and about a quarter of their revenue being dollar denominated are seeing buoyant revenues.

Sandeep Pingle Senior Director – Marketing & Sales, DHL Global Forwarding The Indian rupee’s rapid decline of nearly 20% against the US dollar since the beginning of this year, has set off a negative growth outlook with the economy facing challenges on several fronts.

As we are all aware by now, there are several factors in play that have led to this depreciation.

These include a high current account deficit, reliance on external capital flows – debt and equity to finance this deficit, potentially flawed investments in infrastructure due to policy paralysis and poor decisions, undercapitalized banking system

Fuel price impact is affecting both domestic as well as international transportation.

With customers not accepting fuel related hikes or partially accepting it the margins of transportation industry have come under lot of duress. riddled with bad debts and un-hedged foreign exchange liabilities.

The Indian Rupee’s overall negative impact on trade...

Dr. C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, recently stated that over the past three years, while the domestic market grew at a 15% CAGR, exports have grown only at 11% CAGR. The sharp rise in prices, during 2010-11 and 2011-12, affected domestic and international demand. India's Current Account Deficit (CAD) -- the gap between inflow and outgo of foreign exchange -- widened to a record high of USD 88 billion in the fiscal ended March 31, from USD 78.2 billion in 20112012.SMEs, especially the export-oriented units, were the worst hit.

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Increased input cost = lower imports With the Rupee sliding to an all-time low against the US dollar Indian imports are seeing a sharp dip due to increased costs. All non-essential imports are being deferred, which is affecting both air and ocean freight volumes. Additionally, export products which have a high imported content are also severely impacted. The effect of rising fuel costs on account of the falling rupee will undoubtedly result in a direct increase in domestic costs as well.”

Fuel price increase = increase in domestic costs Oil prices in India are determined by two factors - international crude prices and currency. A barrel of oil costing $100 would cost Rs. 4500 in India when the dollar is at Rs. 45 and Rs. 5600 when dollar is at Rs. 56. Hence even though oil prices may decline 10% in international markets, currency depreciation may offset this decline resulting in high oil prices in India.

High oil prices creep into the prices of almost every commodity and product in the economy. A higher oil price would result in higher cost of production and higher logistics / transportation costs and eventually the rise in costs would be passed on to the end consumer inflating his purchase bill.

Conclusion Several economists believe that India has to find a more effective way to tackle the current account deficit instead of relying on foreign investment. With proper implementation of reformative steps by the government and strict control over monetary policy by the RBI, India could get through the present currency crisis. For a nation that prides itself as the most powerful amongst the developing countries the current challenges would be another opportunity to strengthen its credentials. The world is eagerly watching.

Amit Kumar Head (Logistics), Indo Arya Let me see this in a different light, Indian export has just got 20% cheaper in international market and this has become a serious concern for the export businesses of countries like China, Malaysia, Bangladesh & Thailand (to share, Japan, from last six months is trying to depreciate its currency yen to USD to stay competitive in international trade).

Characteristically, India has been a trade deficit economy and the import - export disparity is amplifying every year which makes rupee declining, a permanent phenomenon but to what extent needs to be defined by policies & practice of central bank & more so of central government.

Logistically, declining of rupee will have severe & immediate impact on this industry which is in its nascent stage of growth.

Instantaneous influence can be seen in increase of diesel price

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which will ultimately result in increase in transportation cost, which consequently, will have multiplier effect on economy and hence will raise inflation. In the side lines, if talks are to be believed after the monsoon session of the parliament session we may see a hefty increase in diesel price (in the range of Rs. 5 to Rs. 7 per liter) Certainly, this moment can be golden, if captured correctly by holding company to increase stake in Indian subsidiary. This may also prove to be appropriate time for foreign investors to start/increase investment in logistics infrastructure such as developing warehouses, strengthening transport fleet or buying stake in logistics companies. Also, Port operators are also believed to be happy lot as they get handsome contributions in foreign currency.

I firmly believe fall in rupee is for a short time and more due to emotional imbalance & mass hysteria. It has already started rebounding (may be Raghu Ram effect) and shall be in bracket of Rs. 57 to Rs. 62 a USD and hence its impact on logistics will be limited and help us in becoming more resilient and resistant to such instances in the future.

Indian logistics market revenue of US$ 95 billion for 2012 (Grown @ 8-9% in last 3 yrs) is set to lose almost US$ 8 billion in revenue this year.

Clearly going by the segmentation, transportation sector is going to suffer the worst. Knowing that India’s transportation sector is highly fragmented, it is going to impact lot of business players who are really small/medium scale. Players will find difficult to take care of their variable costs (low volumes, higher fuel bills etc), those who are successful in meeting this will certainly have tough time meeting their fixed costs. If anyone happens to be around the transporter parks these days, (India has no organized transporters park, however if you roam around outskirts of all major metros) scenes of hugely parked trucks, trailers, containers are prominent.

Companies have reduced their production output to adjust the reduced demands and to manage slow down concentrated on strict inventory control. It means lower warehousing needs, reduced outsourcing of warehousing to control the costs. All these resulting into reduction of revenue for warehousing service providers.

Kalpesh Pathak VP (SCM), FIAT India Seventh largest country by area and second largest by population and most populous democracy in the world named INDIA is going through an extremely difficult phase. Undeterred in spite of global fallout due to Lehmann brother’s crisis, Indian economy continued to grow steadily in last three years. However, 2013 suddenly brought some adverse news due to downward spiral of Indian rupee falling to the record low..!! Almost fallen by a quarter of value in less than a year (from INR 52 a dollar in October last year to 68 in August this year). Economy experts attribute this fall to record high current account deficit, a troubling fiscal deficit and the weakest economic growth in a decade.

Thanks to our policy makers, in spite of policy log jam, they continue to focus on populist schemes (the latest and most significant one called “Food Security bill”) keeping general elections next year in mind to stay in power. The falling rupee might have seen the worst times and might be on a path of stability or recovery, but it has depreciated enough to hit all sectors.

The depreciating rupee is certainly a bad news for logistics industry. It has certainly slowed down the growth resulting into idling of capacities (equipments, services etc.). Going by the segmentation of logistics sector, 62% is contributed by transportation, 25% by warehousing, 9% by freight forwarding and 4% by value added services approximately.

With the economy growing at sluggish pace and the existing cost pressures, the growth of 3PL surely appears to be stunted for this financial year.

Clear cut slow down in the port traffic is being observed.

Imports reduction is putting a lot of pressure on related service providers to keep their staff engaged in productive activities. Little good news for the port sector since @ 25%of the port revenues are linked to the dollar (Vessel-related charges at most ports are also dollar denominated). However, reduced volumes will offset this gain and port operators will struggle to meet YOY growth targets. Will be good if they are able to at least sustain last year performance.

However I am confident about long term fundamental growth of Indian economy. Like every coin has two sides, the good news is that the weakened rupee will make India's exports cheaper in the international circuits. According to the elementary theory of economics, the fall will make Indian products more attractive to foreign buyers while imports will be discouraged. Higher cost of imports will also give an edge to the domestic producers to compete with imported goods.

(Barring sectors relying heavily on imports for materials and equipments that they cannot buy within India). That will reduce the flow of imported goods. The twin phenomenaLOGISTICS TIMES September 2013

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higher exports and lower imports-will hopefully bring equilibrium in the balance of payments and bring back some cheer to logistics industry.

Elementary theory of economics doesn’t work well in India for obvious reasons and hence let’s all pray for all our policy makers (Politicians) that they work for schemes purely on merit and economic benefits rather than vote bank benefits.

India has undoubtedly great potential to become a real economic powerhouse in the world.

Ramesh Krishnan Head (SCM) Sahara Q Shop Declining rupee is one dragon which has cascading effect on every spheres of life. SCM is one of such activity.

With higher dollar rate all imports has become costlier. Thanks to dominance of Far East for importing most of our finished and unfinished goods and also thanks to USD or EURO becoming the most tradable currency the increased cost has badly impacted many business units.

Actually by this logic exporter should be earning more profit as he is invested in Rupees and he is getting paid in higher USD. However in reality the situation is not exactly so. This is just a temporary phenomenon as the buyers have started negotiating better rates and the revenue and in turn the profit has taken a dip.

But more importantly all the shipping line payments are in USD and decreasing rupee would make the SCM cost higher.

Even for export the payment to shipping line is in USD hence the cost is getting higher for exporter as well. Hence they also would be now saddled with lower price and higher cost of logistics / operation.

In such a situation the final target is always Supply chain and Logistics. The Indian companies’ turns the screw on logistic companies to reduce the rate so that their cost could be brought down. With Western countries still not having recovered fully the market remains sluggish and hence to retain whatever business one has logistics companies are forced to compromise on their margin.

Thanks to declining Rupee value, which is resulting in increase of fuel rate it has all round effect in all the logistic costs be it transportation or other input. The diesel cost has been increased so many times from Rs 41.32 in August 2012 to Rs 51.97 in Sept 2013. This had lead to increased primary cost and secondary cost by multi fold. In such a depressing situation it is not always possible to get increase from customer.

Apart from above, declining rupee would also increase the LOGISTICS TIMES September 2013

warehouse cost due to use of diesel in generator and cost of MHE, Racks etc which are mostly imported.

Diesel / Petrol increase also leads to increase in cost of living which in turn results in wage increase which again impacts the cost of logistics. Since most of the modern warehouses are situated in the outskirt of the city the commuting cost and cost of city delivery also is affected badly.

On the whole rupee devaluation is impacting the entire economy as well as logistics industry very badly and unless

Indian imports are seeing a sharp dip due to increased costs. All non-essential imports are being deferred, which is affecting both air and ocean freight volumes.

strong measures are taken by the Government to avoid further fall of rupees the entire nation is in for some major recession. I feel Government should steer clear of populist and vote catching measures like Food Bill and should gear itself to some hard fiscal measures.

Prof Samir Srivastava

IIM, Lucknow A few months ago, FICCCI estimated the logistics sector in India to reach $200 billion by 2020. Similarly, the Ministry of Road Transport, Government of India, had said that India's logistics sector is likely to cross the $200 billion mark by 2020.

The underlying assumption was that this sector will grow by 10-12 percent over the next few years and the rupee will remain stable. Will these projections still hold true given the declining rupee is a big question mark.

The declining rupee is a big area of concern for most business sectors in India. This, along with lower GDP growth rate of 4.4% in the first quarter of 2013-14 along with manufacturing slowdown do not augur well, especially for logistics businesses. The steep fall in the value of the currency will adversely impact the expansion plans and new projects of firms in many sectors in the near future, thus having a cascading effect on logistics firms. The sectors that will see considerable slowdown include automobile, manufacturing, infrastructure, aviation, hotel and retail. Costs relating to manufacturing, transportation and marketing are important for these sectors. Some discerning signals and

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trends are already there. Mahindra & Mahindra Ltd (M&M) has terminated the services of nearly 500 temporary workers at the Chakan plant near Pune in July 2013 and firms like Aqua Logistics, Charter logistics, etc. have incurred losses in the first quarter. Further, projects like Nagpur-Mihan Project may suffer a delay/ setback.

Logistics sector's growth and well-being depends on demand, supply, technological, policy and regulatory environments.

Generally, firms in textile, automotive, pharmaceutical, manufacturing, retail and FMCG sectors opt to outsource their logistics requirements when macro business, infrastructural and policy environments are favourable. As switching costs are low, presently these firms may not prefer going to 3PLs. As a result, capacity addition within logistics sector will go slow.

Can we convert the declining rupee into an advantage? Is there any opportunity? One way could be to raise exports of processed petroleum, leather goods, gems and jewellery,

Companies have reduced their production output to adjust the reduced demands and to manage slow down concentrated on strict inventory control. It means lower warehousing needs, reduced outsourcing of warehousing to control the costs. superior textiles and select chemicals. If Indian firms have a seller’s advantage then they will make higher profits.

However, if these firms are more of price takers, then they will find prices getting bargained down. Many apparel firms are already being forced to give bigger discounts because of declining rupee. So, logistics sector may not have appreciable gains. Further, as our currency depreciation is not different from what is happening in Brazil, South Africa, Australia and other emerging markets, do their experiences suggest any way out? Not much as of now.

However, all is not lost. What we need to do is to get our house in order and so the focus should be on the real sector comprising infrastructure, manufacturing, etc. The sources of problems are primarily rooted in inadequate supply chains and logistics infrastructure and practices. So, investments in roads, railways, ports and highways, warehousing, expansion of logistics capabilities and implementation of ICT (including new and innovative applications) should be encouraged.

Manufacturing should be promoted; in India, very few states are aggressive in promoting manufacturing. GST should be implemented at the earliest. Specific collaborations like the ones between DB Schenker and Apple or the way Best Roadways carries out consolidation of export apparel provide leads to focus on innovations and synergy. The logistics sector has to device an adequate hedge against constantly rising diesel price. Practices to get reverse hauls at nearly same rates LOGISTICS TIMES September 2013

as forward freight also need to be discovered. „ Prof Akhil Chandra Cosultant, SCM The continuous slide of Indian Rupee against Dollar is a cause of concern and shall have some definite impact on Indian logistics business. One has to move from disadvantageous situation created due to free slide of the Rupee and focus the efforts to the areas where new opportunities shall get created during this state of crisis. It can be a blessing in disguise for some.

Policy makers are striving hard to contain current account deficit(CAD) and all out efforts are on to contain the import and increase exports and check the volatility in the foreign exchange market..

In order to curtail imports, Government of India shall have to revitalize manufacturing sector which unfortunately during last few months is showing even negative growth. Existing manufacturing companies also shall have to resort to cut down the imported content and find indigenous ways. This shall require innovative ways and new R&D efforts for survival.

Here lies the opportunity for logistics companies to strengthen inbound logistics which can prove backbone to the manufacturing companies by transporting raw material and components required by the shop floor of manufacturing company at the right time, at right quality and at right price.

While outbound logistics is at a fairly matured stage in our country, inbound logistics is still at a nascent stage and it is the right climate now that logistics companies tie themselves up with manufacturing companies closely for a long lasting relationship with them.

Other opportunity for logistics companies lies in earning foreign exchange for the country and cross the national frontiers and provide consultancies in neighboring countries like Bangladesh, Nepal or African countries and nearby middle east countries to start with.

On the export front, as a matter of fact our performance since last 12 years has been quite impressive and is much higher at 20 per cent than the world average of 12 per cent but our imports have grown still higher touching the rate at 28 per cent. So logistics companies which are tied up with exporters shall still have to work harder to help existing exporters to expand their business and become competitive in terms of efficiency, time and service.

Few foreign companies may have to run away from the country as probably their royalty payments etc. in dollar term may go down and that space must be filled up by big and tough indigenous players both in manufacturing and logistics sector. When things start becoming tougher it is the tough who get going. „

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The Reverse Game Poised to get interesting

Manufacturer

In India, consumers are returning products worth $12-15 billion to manufacturers and this number is growing every year. This business trend calls for ushering in a robust reverse logistics era- something which has worked well in the mature markets which have seen the subtle emergence of specialized LOGISTICS TIMES September 2013

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Consumer

players. Hitendra Chaturvedi, Founder & MD, Greendust explains different dimensions of reverse logistics business (which he prefers to call ‘REVERSE SUPPLY CHAIN’ as the term ‘LOGISTICS’ has a transportation connotation) while underlining the possibilities in the domestic market in the medium run: LOGISTICS TIMES September 2013

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IT

was in 2000 that I became conscious of existence of a formidable supply chain discipline called reverse supply chain for the first time; and that too by chance. I was in the US then, associated with a PE firm which was negotiating with an e-commerce company for some strategic investment deal. When I met the promoter of the company, he asked me to define supply chain. I remember giving the typical definition - “movement of goods all the way from manufacturers to the consumers.” To my utter surprise, I was told that my answer was only 50% correct since it only underlines the forward movement of goods and products. And then during the course of the conversation, I was explained the nuances of reverse supply chain which included a whole new dimension to the life of a product after it has been sold. Of course, in the following years I understood the concept and efficacy of this module more comprehensively thanks to my stint with companies like Microsoft.

Huge business opportunity

In general terms, when we refer to logistics, we mostly end up indicating forward movement. But in an era wherein e-tailing business is growing by leaps and bounds all across the globe, reverse supply chain has also become very critical. One has to understand that in a holistic supply chain, the strength lies in the strength of the weakest link. And this is something leading manufacturers all over the world have realized which in turn has given a decisive push to the rise of the reverse supply chain business. Statistics tell the story. For every 100 products that are sold or pushed forward from manufactures to the consumers in the US, about 8-10 items come back to the manufacturers. In cumulative terms, it means products worth a staggering $ 350 billion is returned every year to the manufacturers in the US. Just LOGISTICS TIMES September 2013

to cite a specific example, Walmart in the US has a revenue base of around $100 billion annually. And their returns amount to $7 billion. That is more than the worth of consumer electronics and IT appliances sold in India every year.

Certainly, managing a return rate of this proportion requires specialized firms.

However, even in developed countries, a well-defined strategy in managing the returns is often found to be missing.

They often indulge in shifting the product to a different country. A lot of returns in the US and Europe find their way to countries in Africa, South Asia and China. And there are enough customers in these countries for buying refurbished products.

India as well. According to an estimate, the total percentage of items returned in India is presently to the tune of 4-5 percent. This roughly amounts to $ 12-15 billion on an annualized basis.

And with multinationals coming in, the return rate would stabilize around 8-10 percent. Europe too has similar ratio of returns.

Its an aberration which companies in India are realizing now- something which their counterparts experienced about two decades ago in the matured markets of the US and Europe. Many a times, the cost of the return of the product for simple items turns out to be higher than the product itself.

So there is no point in bringing it

According to an estimate, the total percentage of items returned in India is presently to the tune of 4-5. This roughly amounts to $ 1215 billion on an annualized basis. And with multinationals coming in, the return rate would stabilize around 8-10 percent. Europe too has similar ratio of returns.

Indian scenario

In today’s market scenario, products can be returned at the drop of a hat.

Customers can return back for multiple reasons – transportation damage, accessories missing or even for the reason that they did not like the colour of the product once they receive it.

That is they notice a discrepancy in the colour design of the product on the portal or any other promotional medium and what actually falls in their lap. Retailers too return for multiple reasons – they may send it back even for the reason like loose packaging. And this return movement is a trend which has begun picking up momentum in

back and then indulging in repair and refurbish within the company. In 70 percent cases in the country, the cost incurred in the return of the product is higher than the value of the product.

So it means the moment a return is initiated, the company has lost the money. A critical parameter which the companies need to look into is: what is their asset return rate? Asset return rate in simplest terms is scrap value which normally is 8-10 percent. Just imagine if returns are not treated expeditiously, they will occupy your warehouse space.

Furthermore, it will result in the bad experience for customers and its cost could be colossal in the future. Things

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are changing and there are international benchmarks. With more MNCs coming in, Indian companies will need to adopt those standards. Take the example of a company like Amazon. They have very customer friendly return policy.

And this is what needs to be emulated because global companies have realized that 80% of the customers who have a bad return experience will not buy from them again. Reverse supply chain’s inherent DNA is green DNA – reduce, reuse, repair, recycle.

So this is a business model which is very environment friendly across all categories and Indian companies need to embrace it, sooner rather than later.

model breaks. Then IT requirement of managing reverse supply chain is very, very different. There are two elements of reverse supply chain. Firstly, managing the returns, repair and then refurbishing. The other issue is that of liquidation or asset recovery. Over the years, specialized players have emerged with distinctive processes to undertake reverse supply chain activities. There are companies like Genco, Liquidity Services Inc., and many more which is based in the US. For example, Genco is over $2 billion annual turnover firm which is only involved in reverse supply chain for over 20 years. There are three four other dominant names which

operate at a global basis.. GENCO had started as a warehousing company, then they moved on to transportation and then they promoted themselves as a specialized player in reverse supply chain. We also have specialized retailers who have developed an unmatched expertise in selling only factory seconds kind of products. A clear example is overstock.com, or for that matter Ross, Marshals, or T J Max. Many companies have tried to take control of managing reverse supply chain on their own but, by and large, they have not succeeded. The reason is not difficult to understand. As a single company, they do not have

Why do we need specialists?

People often ask why do established 3PLs everywhere fail to pick up expertise in the reverse supply chain? You have to understand one thing clearly here. It is a highly specialized discipline which is in contravention with the processes and infrastructure being created for the larger forward movement. The business model of a FedEx or an UPS is purely based upon throughput. How many boxes move in a day through the system – that is the basic parameter of their operations. If you bring in returns there and are compelled to open the boxes to see what needs to be repaired, their

The business model of a FedEx or an UPS is purely based upon throughput. How many boxes move in a day through the system – that is the basic parameter of their operations. If you bring in returns there and are compelled to open the boxes to see what needs to be repaired, their model breaks.

Source: Horizontechnology.com

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enough volume to justify the cost that is required to do reverse supply chain right. And therefore they are always looking for specialists. A 3PL service provider like us aggregates the volume and make it part of our viable business model. If I specifically talk about my own company, what we have done differently in India is that we have combined reverse supply chain’ source of engine - by managing the returns we are getting the products and we have created a retail brand Greendust that only sells factory seconds products. Now why did we combine the two- reverse supply chain operations supported by a retail brand for refurbished products? The former can be handed over to a specialized transportation player also. But when you talk about reverse supply chain, it quintessentially means asset recovery for the companies. India is so value conscious that most of these brands do not look at the larger value of managing reverse supply chain. What we are doing is: when we negotiate the purchase of these products, we also build in the cost of reverse supply LOGISTICS TIMES September 2013

Most of the 3PL service providers can partner with specialists in reverse supply chain like us which would basically mean the marriage between their transportation stronghold while the specialist would take care of repair, refurbish and after sales service. chain. So even as there is a service element to it and then there is a buysell retail element, we are bundling all of these together and then negotiating the price of the product.

Buzzword no more

This might have been true a couple of years ago but now even in the Indian context reverse supply chain is no longer a buzzword.

Manufacturers are looking at it very

seriously and custodians of the logistics business are also eyeing for devising solutions for the backward movement. Now the issue is what does it take for a company (may be a start-up) to develop expertise in managing returns? A start-up firm in reverse supply chain would require technology experience and domain experience. This can’t be merely done by having a large office, advanced coding applications and a dynamic

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portal to tell the world about their existence. We realized this prerequisite at a very early stage and that is why we have set up 14 value added centers across the country which are repair plants as well as warehouses.

We also have 170 franchised stores across the country. So this business model can only work if it has got scale. The real challenge for any start-up would always be to build up scale as expeditiously as possible. If you go to a company like Samsung and tell them that you would be managing their returns in a specific location, they will not entertain you.

A company like Samsung would always require trusted partners which can manage its returns on pan-Indian basis.

It is very important that companies in this space targeting global companies work ethically. In my experience, short-term gains will wipe away long-

term sustainability. Trust gets built by transparency in processes, robust IT systems, and a mature, experienced team that thinks long-term. In many cases you may even have to make losses to show your strategic intent to the business partner.

The unfolding scenario

Even 3PLs can take a big leap in this vertical, they can create separate divisions which will be involved only in managing returns. Most of the 3PL service providers can partner with specialists in reverse supply chain like

If a Walmart comes, it will have a huge returns management challenge and it will bring large-scale specialists. No gain saying that it will take competition in the reverse supply chain business to a different orbit altogether.

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us which would basically mean the marriage between their transportation stronghold while the specialist would take care of repair, refurbish and after sales service. A combined value proposition of this nature could be very strong and mutually beneficial.

reason why they would not look for similar kind of arrangement in India as well. And that is where the value is. The growth in e-tailing is going to provide a big push to reverse supply chain in the country. In the initial stages, some e-commerce firms had

Going ahead, we can have specialized reverse supply chain players catering to specific commodities and not just players which can dabble with anything. Domains like pharma will offer big-ticket opportunity or even perishable returns could become a big business.

There is a need for such joint initiatives since everybody going forward is going to look for holistic supply chain which means ample expertise in managing the returns. MNC manufacturers, especially are quite used to it in the matured markets and there is no LOGISTICS TIMES September 2013

shown reluctance to outsource their logistics requirements. But that is not the case any more. They have realized that outsourcing both forward and returns create more value for them since managing logistics is not their core competence.

An interesting question I am often asked is: can we expect the global reverse supply chain specialists arriving in the country in the near run? My feeling is they would come only when the players they cater to are allowed to set their shop in the country. If a Walmart comes, it will have a huge returns management challenge and it will bring large-scale specialists. No gain saying that it will take competition in the reverse supply chain business to a different orbit altogether.

In my reckoning, next three-five years would be very interesting wherein new dimensions would be added to the reverse supply chain business. There will be new products in the existing categories, there will be addition of new categories and every category will have returns. Medical equipments, auto components, intensification of buy back programmes, etc. the market opportunity would be very big in the country. Going ahead, we can have specialized reverse supply chain players catering to specific commodities and not just players which can dabble with anything. Domains like pharma will offer big-ticket opportunity or even perishable returns could become a big business. In the case of pharma, the expired products have to be brought back. We may even witness ushering in of a spell where consumers would be empowered to return back such a common item as a toothpaste. I also anticipate the established players – both domestic as well as MNCs- giving a fresh push to develop expertise in managing returns. As I had explained, there have been serious failures in the past because same operational module has been applied for forward and return logistics which is not sustainable and it eventually breaks the entire model.

But lessons have been learnt and this would not be the case in the future.

❛ We have a solutioncentric approach

❛

INTERVIEW

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Global warehouse-automation major SSI Schaefer has been in India for quite sometime – first through franchise route and then by setting up a 100% owned subsidiary five years ago. Speaking with Ritwik Sinha, the country head of Schaefer’s LOGISTICS TIMES September 2013

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Indian subsidiary Suunil Dabral presents the report card and experience of the company in the Indian market while also explaining how the German firm is grappling with its misplaced brand identity in Asia. Excerpts from the interview: Before I take up with you the specifics on your Indian operations, let me get a sense of Schaefer’s global profile. How would you sum up its journey of over 70 years now?

The company profile is very long due to various milestones achieved but let me try to keep it brief here, SSI Schaefer was founded by Fritz Schäfer in Burbach, Germany in 1937. The company began with the production of transport containers and later a milestone in the company‘s history was the development of the unmistakable Lager-Fix container in 1953: a stackable container with an opening at the front which put the company on the fast track growth trajectory. Today, Lager-Fix containers are an inherent part of many production operations and warehouses around the world. Following the shutdown of the 150 year old iron ore mine “Pfannenberger Einigkeit”, the Schäfer family took over the premises in 1962 on the ‘Pfannenberg hill’. This was the start of the successful division into what was to become Schäfer Werke GmbH on the Pfannenberg hill and Fritz Schäfer GmbH in the valley. In 1963, the EMW Steel Service Centre moved to the new site on the Pfannenberg hill. Soon afterwards, Fritz Schäfer GmbH started manufacturing the first racking units.

With the foundation of the Schaefer Shop in 1970, the firm launched a new distribution channel: The Schaefer Shop mail order department allowed customers to order equipment for the warehouse, workshop and office directly from the catalogue.

In the 1970s, Fritz Schäfer GmbH launched numerous innovations onto the market: Bolt-free racking systems, stack and nest containers and high bay racking as well as the Euro-Fix containers for conveyor technology.

The project business division was launched at the same time in Moscow, North America, Amsterdam, Bejing and Tokyo. SSI Schaefer constructed logistics centres for aerospace and shipping, and increasingly vehicle spare parts warehouses for BMW, Daimler-Benz or Nissan. In 1976, SSI SCHAEFER produced the first plastic waste container, and in 1977, the first steel waste container.

It has truly been a case of organic and inorganic growth by diversifying along the value chain i.e. upstream, midstream and downstream expansion was done by integrating the entire value chain.

By now SSI Schaefer had positioned itself as ‘One Stop Shop’ for all ‘inplant’ logistics by offering integrated storage solutions ranging from pallet racking, shelving to highly specialized

automation storage solutions. SSI Schaefer today is now in 54 countries around the world, having 16 factories and employs more than 9000 people globally. Today, SSI Schaefer has successfully positioned itself as ‘Total Intra-logistics Solution Provider’ Are you primarily rooted in Europe and other developed markets of the world? How would you explain your presence in Asia?

No, you can’t say that today we are primarily rooted in the western markets only. Our presence in Asia is practically everywhere with Singapore being the regional headquarters. We are present in Australasia and within Asia, we are strongly positioned in Singapore, Australia, Hong Kong, Middle east, China, Malaysia, Thailand, Philippines, India, South Korea, Taiwan and Vietnam. We have a hub office in Dubai also which covers GCC and Africa regions.

You arrived in India in 2008.

Tell me, what were those basic premises which encouraged the company to directly kick-start its operations in the country?

Schaefer’s way of getting into a market is something like this: first of all, we identify a target country. We indulge in serious analytics of different parameters of that country to draw a comprehensive LOGISTICS TIMES September 2013

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entry strategy. Depending upon analysis, we take a call whether we should directly enter into the country taking the subsidiary route or enter via a representative partner. It is common to test the market with a franchisee or a dealer. That dealer promotes Schaefer products in the market and when we reach the critical mass, we take the route of opening up a subsidiary of our own.

In India, we followed this methodology - even before forming our subsidiary in 2008, the distributor was active. And there were many customers who were directly importing our products from Germany. So awareness among a certain set of customers in India was already there when we formed the subsidiary.

As a company, we were getting many enquiries from Indian customers. Some Indian players had even expressed their interest in becoming our joint-venture partner. But Schaefer usually does not take this route. We had a strong global reputation and coming with a direct subsidiary outfit was the right decision.

Ever since our direct beginning in the LOGISTICS TIMES September 2013

Ever since our direct beginning in the country, we have implemented more than 160 projects in India and now we have over 200 enquiries in hand since January this year. Most of them have been converted into orders, few of them are very large and involve complex degree of automation. country, we have implemented more than 160 projects in India and now we have over 200 enquiries in hand since January this year. Most of them have been converted into orders, few of them are very large and involve complex degree of automation. They will take some time because we are

still consulting them. In addition, there are many enquiries for other range of products like plastic crates, containers and plastic pallets also. The best part is because of SSI Schaefer’s size and its over 75 years long global standing and reputation of delivering quality products and services, getting clients

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in our fold is not difficult. SSI Schaefer has its own niche in the market.

What is group’s annual turnover like?

It’s a family managed group and an official announcement is not made on the numbers for public information. But going by the industry buzz, I have heard the guesses about SSI Schaefer being a multi-billion Euro company globally!

Management decided to remain as a ‘Family Owned’ company which gives better control over the the company to run in a much independent manner.

The risk, R&D, innovation, acquisition, diversification or be it anything else, the company is free to take decisions.

Employees are empowered to take decisions and the management is very flexible and accommodative for new ideas.

Can you tell me the kind of investments which Schaefer made in starting its subsidiary here?

The investment in India has not been substantial because we don’t have a factory here. We are presently using the factory in Malaysia to service the Indian market because of a specific trade treaty advantage. In fact, the plant in Malaysia is so big that it is serving the demand coming out of the most Asian countries as well as Latin America. In India, because of the treaty benefit our customers pay only 2.5 percent import duty. Also the lead time factor is very important – we get the materials in flat ten days from Malaysia. If we compare the transit time from China or elsewhere, then it is much higher.

As I said Malaysia factory is huge and by the end of this year, we are adding another 5000 metric tonnes capacity which is under construction right now.

The idea is to reduce our dependence on our plants in Europe for sourcing.

So Malaysia factory from the next year will produce all the conveyor range, all racking including AS/RS profiles etc.

This is part of our larger design to become totally self-dependent in Asia where we have planned to expand our automation business significantly. The LOGISTICS TIMES September 2013

rationale is simple: because somehow the racking system became our main product in Asia, customers here started believing that we are not an automation player. If you look at our European profile, 60-70 percent of our business comes from automation products and the case is quite reverse in Asia resulting in that misconception. We clearly want to change the perception in the continent.

In fact to attain this objective, Schaefer has created a dedicated automation tech centre in Singapore where we are inviting customers in large numbers to showcase our products from Asia and also an Automation strategy is being put into place for Asia. We are training the students also to impart automation knowledge to create the resources in the future.

Do you also suffer from this automation and non-automation confusion in the Indian market?

Both perceptions exist here as well and that reflects in our business also.

At the moment, I am not in a position

better phrased as ‘dynamic storage systems,’ we have few projects which are there already. But the future is in the automation and we have started working in that direction now. We need to change our image as a ‘Pallet Racking Company’ in the market and in 2014, our India strategy will demonstrate this shift!

It is widely believed that Indian automation market is broadly dominated by the importers and that specialists like you are still not in the forefront. How would you respond to it?

Not only dealers, the automation market also have an overwhelming presence of consultants. Now the question is who can be classified as a consultant? How does he acquires the knowledge? A consultant may at the most advise a process, design a warehouse fulfilling the client’s goals.

But that is always not a fool-proof design because when it comes to a system supplier then they can spot the

Malaysia factory from the next year will produce all the conveyor range, all racking including AS/RS profiles etc. This is part of our larger design to become totally self-dependent in Asia where we have planned to expand our automation business significantly. to quantify the automation and nonautomation businesses here in India.

So far, most of the projects have been in non-automation area which can be classified as ‘static storage system while only a few in automation comparatively.

When it comes to automation,

differences in the design parameters and the solution performance. Because as a system supplier we know what a solution stands for and its specific performance in different throughput scenarios. This difference, many a times, goes un-noticed and the end-

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user fails to achieve his objectives. This is what we have noticed in the market in some cases. For instance, a few Pharmaceutical companies we know are opting for AS/RS systems even when their throughput does not qualify for this. They are doing it either for a ‘Passion or Fashion’. And now there are various suppliers of dime a dozen products in this category. But one must need to understand what an AS/RS is for and AS/RS is not a solution but a part of an overall solution in most cases. We do not usually offer a standalone AS/RS. We rather recommend it as a part of the solution. But then it depends on what is the throughput you are looking? What are your growth plans? What would be the size of the warehouse, labour cost, ROI and most importantly the ‘Vision’ etc. One has to do a lot of data analysis of the SKU pattern (A movers, B movers, C movers), sales, peak and non-peak time, throughputs, order size, lines etc. You have to indulge in a lot of data analytics before you conclude whether an AS/ RS would help or not. And here people are conveniently skipping that part. We have been to the warehouses where you can walk faster than an AS/RS crane moves. Finally I would say that we cannot close our eyes on the fact that India will remain a populous country like China but different from China in many ways, hence the companies like us will have to strike a right balance amongst the ‘Man, Money & Machine’ factors. This balance will define the ‘Degree of Automation’ for a right goal!

Are you telling me that the real differentiator for a company like SSI Schaefer is that it believes in solution-centric rather than product-centric approach?

Yes, and this is how this business should be. An ideal solution will not just address the current challenges but will be scalable for future growth also! We would never want to be in a situation where we offer a solution to a customer and it would not fulfill the objectives eventually leaving a bad

taste. If you are a serious player, then you must understand the long-term objectives of your customer. Just to cite an example, in past three months we have received 15 inquiries from Pharmaceutical companies for AS/RS. And what is their throughput – 10-19 pallets per hour. From our perspective, AS/RS is not the right solution for them. They just need other solution which can take care of their current and future throughput. We are not in a hurry or in a race to lead the market but we want to educate the market to buy what they actually need.

All the markets in the world have their own peculiar characteristics.

On that front, how would an explain Indian market?

According to us, peculiarity is mostly around the awareness part. I am not saying that Indian customers are unaware about the developments happening around the world. But generally when we speak with the clients, they are either fascinated with some ideas which are in practice somewhere in the world and then they want the copy-paste version of that. When it comes to copy-paste, then it’s a red signal because it does not always work. And if we tell it openly, there is that risk that the customer can jump to the conclusion that we are not capable of delivering what they want though that is not the case. In our space, we are probably only company in the world where everything is integrated – both horizontally as well as vertically.

We have everything coming from one source- whether it is AS/RS, conveyor, WMS, plastic bins, crates, pallets, etc. So when we are allowed to provide complete solution – all the pieces communicate with each other. And because of that we are also able to provide superior customer service. Another peculiar feature from our standpoint is: customers try to resist automation to the maximum possible limit because they feel that the labour is cheap in India, and trust me it is a wrong notion (It is not cheap {Efficiency + EHS Risk} / {Cost + SLA - Service Level Agreement}). There is only a select list of customers who are fully

convinced that automation is the way to go.

You are also dealing with Indian LSPs. How do you find them?

Are they sold on to the idea of automation?

They are grappling with other challenges also. They are aware of technologies and options available to them. But let me confess, we are yet to understand how they tend to act under their challenges. One trend which is clear to us is that the end-user industry is not giving them long-term contract to justify the investments and time.

And, therefore, LSPs hesitate in making serious investment in automation. This is clearly a bottleneck even as most of them are aware that they need to consistently upgrade their efficiency but they find it difficult to predict the future of the contract beyond three years or so.

Finally, you have presented the report-card of past five years.

How does the outlook for next five years look like?

It looks promising and we are excited to see the market shift changing for an improvement. One thing we also admit is that; we are a European firm and we are not cheap. And it is like this – we are a R & D driven company and have a superior engineering brain pool.

Our global success has been achieved only because we created value for our cutomers which is demonstrated by our repeat orders ratio. We are not in the business of commodity selling and we feel that India will become ‘Value Centric’ market in next five years. We have our own niche. As I said, globally we are present in 54 countries and there are many companies which have used our products elsewhere in the world and are now present in India and talking to us. We would like to evolve as a company which is a leader in Intralogistics, not by volume but in quality.

We want to reach the stage wherein our customers become our advocates and that is the milestone we are eyeing for the medium run.

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Devising right courses

L

ogistics is defined as a business planning framework for the management of material, service, information and capital flow within an organization.

Business logistics refers to giving the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer.

In the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the destination, logistics involves detailed coordination of a complex operation involving many people, facilities or supplies. Whether it is inbound or outbound logistics the process involves careful planning and deep understanding of the subject matter. Unfortunately, logistics in India is largely an unorganized sector with untrained manpower. The organized sector is responsible for only 6% of the market share; the good news is that this meager share is likely to double (12%) by 2015.

The growing demand of consumers and intense competition among companies to reduce costs has led to the growth of 3PL in India. Many of these companies are planning to broaden their areas of operation and are also planning to develop their own logistics parks across the country. If this trend continues as per the estimates, the organized logistics players will need human resource to manage increased operations.

Logistics costs in India are amongst the highest in the world (10-20% of GDP as against 8% for the developed markets).

Inefficiencies in transportation, poor condition of storage infrastructure, complex tax structure, low rate of technology adoption are some of the causes, but primary among these is poor skills of the logistics human resource.

The manpower lacks analytical skills that are required for this sector. Acute skill shortage is perceived at all levels – LOGISTICS TIMES September 2013

Dr. Veni Mathur Ex-faculty, IIT, Delhi Dean, Million Minds Acute skill shortage is perceived at all levels – from the drivers, couriers, loading/ unloading staff to supervisors to senior level managers and entrepreneurs. from t h e drivers, c o u r i e r s, loading/unloading staff to supervisors to senior level managers and entrepreneurs.

There are no proper institutes for improving the skills of those aspiring to make a career in logistics. Million Minds Management Services, a company dedicated to the task of bringing together the academicians and industry, through training and placement for logistics, has successfully developed two basic courses – 1) Logistics Assistant 2) Logistics Supervisor to meet the needs of the industry.

The Logistics Assistant course is the programme open for 10+2 pass students. It is a three month training programme wherein the basics of logistics along with some soft skills, elementary English and knowledge of computers will be imparted to the students to make them ready for the logistics industry at the entry level.

These candidates will be trained to

efficiently handle jobs as Delivery agents and operations assistants at Warehouses and Express Cargo companies.

It also includes industry visit as well as 15 days on-the-job training for the students to have a realistic experience of the working environment of a logistics company.

Logistics Supervisor is a course designed for students at the graduate level, where MBA students can also undertake the course as an additional qualification.

This training course is of six months duration and covers various modules of logistics and supply chain management to get an in depth knowledge of this field. The two modules on Operations will help to increase efficiency and responsiveness that is vital to meet the day to day challenges of the logistics industry. Besides, there are modules on costing and taxation, warehousing and inventory management, customer care, 3PL and intermodal transport.

This course includes a one month on-thejob training with any logistics company after which the candidate will find placement at operational and supervisory level in any logistics company.

These training programmes cover the requirements of most of the Logistics industries as Courier & Cargo, Warehousing, Inventory, Transport & Logistics, Aviation and Shipping. We at Million Minds have had encouraging response from the industry about the contents of the programmes in enabling the employability of the candidates.

An MOU has been signed between Million Minds and IL&FS Skills to carry out such training and placement activity pan India. Talks are in progress with some more organizations where Million Minds will function as knowledge partner to impart the training programmes. In this logical way, the efforts of Million Minds will help to bridge the skill gap that exists in the logistics industry. This will ultimately improve efficiency and reduce costs of Logistics in India.

India Infrastructure Summit Inadequate infrastructure remains an obstacle to India’s achieving its full economic growth potential. With India seen as one of the world’s fastest growing economy, meeting the demand for key infrastructure is critical.

Government has put together an ambitious plan to upgrade and expand infrastructure with an investment of over $1 trillion during the 12th Five Year Plan (2012-2017). Against this backdrop, Federation of Indian Chambers of Commerce and Industry (FICCI) is organizing the fifth edition of ‘India Infrastructure Summit’ on 23rd September, 2013 at Federation House, New Delhi.

India Infrastructure Summit is the largest platform for policy debate relating to infrastructure sector in India. It brings together Central and State Government officials, key policymakers, regulators, leading infrastructure developers, contractors, Views of the summit held last year investors & financial institutions and other stakeholders in a dialogue for development of infrastructure in the designed to address key challenges country and towards creating a robust and issues facing infrastructure sector. framework for greater participation of In earlier editions, it was addressed private sector in this process. by key speakers like Mr Kamal Nath, With enriched deliberations from the then Roads & Highways Minister; business leaders and market experts, Dr C P Joshi, the then Roads & the Summit delivers the highest quality Highways Minister and Mr Montek S content, addresses the most current Ahluwalia, Deputy Chairman, Planning topics, and debates the most challenging Commission. issues in infrastructure in the current The Summit will discuss and highlight scenario. issues pertaining to infrastructure Why Attend projects and provide a platform for India's largest and most seeking inputs from stakeholders. It will comprehensive event on also focus on policy coherence needed infrastructure sector

Learn global best practices & partnership strategies and policy updates through interactive sessions, panel discussions and roundtable debates Influential presentations/ speeches by key policy makers and industry experts Identify new strategies and technologies for challenges & opportunities facing the sector Network with policymakers, business leaders and market experts to forge new partnerships & gain competitive advantage.

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Business Productivity in an Uncertain Economy Gunjan Sachdeva, GM (National Business Head), Toughbook Panasonic India

The Coffee, Shoe, Clothing Store For the past six months, I’ve been picking up my morning coffee from a local coffee store near Panasonic’s offices. Last week when I made my usual coffee run, I noticed something was different when the lady asked if I was looking for shoes instead of a latté. While I was disappointed at the closure of my usual coffee store, I was more amazed that the reopening process took place over the course of the weekend.

Just a few weeks later, that coffee store turned shoe shop also closed down and was now selling women’s apparel.

The Certain Uncertainty In today’s competitive and ever changing business landscape, the only thing that can be said with certainty is that we are in a period of extreme uncertainty. However, the bottom line is that any form of uncertainty leads to a short term focus. With an increasing emphasis on cost reduction, global and local enterprises are looking for ways to improve efficiency.

For example, warehouses and LOGISTICS TIMES September 2013

distribution centers once thought to be basic business functions are starting to leverage technologies to focus more on accuracy and efficiency.

Technologies, such as RFID, have become key tools in reducing operator errors, streamlining processes, and more importantly, increasing cost efficiencies.

Today, technology is being widely used to help streamline business processes. While technology holds many benefits and promises, it led me to ask the question on how businesses can cut through the chatter to identify the most appropriate technologies that will be informed, long-term effective business strategies rather than a reactive, short-term focus.

Hype Around RFID Five years ago, an article on Forbes talked about how RFID held the potential to significantly change the consumer packaged goods industry.

However, at that point of time, the reality had yet to live up to the high expectations. The same article then went on to ask, “Could 2008 be the year?”

Since then the conversation has moved on. Last year, RFID started showing signs of delivering on its potential recording US$8.7 billion RFID market value, up from US$6.51 billion in 2011. In a recent Frost & Sullivan report, it identified 32 emerging RFID applications across retail, postal, and baggage handling demonstrating the true business value of a technology that was discussed half a decade ago.

Employee Pain Points While investments in new technology deployments, such as RFID, are critical to the progress and success of any business, I am a firm believer in balancing the technology approach with investing the time to understand the company culture and the needs of your workforce.

One of the most effective ways to do so is to conduct ‘ride-alongs’ with field teams or host focus groups to get a sense of their day-to-day challenges and pain points. This allows you to observe redundancies and inefficiencies and collect feedback directly from the endusers. In addition, this will help communicate to your workforce early on that the company is interested in addressing their needs in order to help make their jobs easier.

In one of my ‘ride-alongs’ with our customer, I observed that warehouse operations are sometimes labor-intensive and filled with inefficiencies. For example, one of the common practices in warehouse operations is to print batches of labels for incoming goods at a central IT office. The labels are then retrieved by a worker when the shipment arrives. This process requires the receiving dock staff to undergo time-consuming round trips between the dock and the office, creating the possibility of incorrect label attachment to the shipment.

Mobile label printers were then introduced to streamline processes to enable productivity gains and accuracy improvements by eliminating this manual roundtrip process. Workers can now use forklift-mounted mobile printers

to apply barcode or RFID labels on incoming materials immediately as they are unloaded from the receiving dock. This procedure ensures items are prepared for scanning and other automated processing systems within the facility.

Panasonic Toughbook’s Perspective While RFID and mobile label printers helped streamline the operational processes at the warehouse operations office, question that still remains is: how the company managed to identify and select these two technologies to meet their business needs.

At Panasonic Toughbook, we believe in developing products that help our customers meet their overall business objectives. We do so by constantly speaking with them to understand their needs, as well as to keep abreast of industry trends.

Based on interactions with our customers, we believe that businesses are looking for devices that provide the best value for money based on key considerations, such as weight, cost, durability, and functionality. These factors are so crucial to the point that the lack of certain features could result in the loss of business productivity. More importantly, devices have to be selected to meet business needs while creating synergy with existing infrastructure or tools.

The Resistance Factor The ability of a device to withstand harsh conditions such as vibrations, and drop and shock resistance are crucial in rugged environments.

This is especially the case for use in mission-critical operations, where it is important to have a system up and running without any failure. In addition, the growth of mobility in the region has made ruggedized devices a necessity to businesses.

IDC estimates that 40 percent of employees in Asia Pacific will be

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mobile workers by 2015 with the majority of them being office workers.

With these considerations in mind, Panasonic Toughpad JTB1 has an IP65 rating for resistance to dust and water, including the ability to withstand drops from up to 150cm. To maintain the quality and reliability associated with Panasonic Toughbook, the JT-B1 components are fully made in-house providing the flexibility to configure the device to suit customer requirements. This approach results in a longer lasting device when compared with other consumer devices, lowering total cost of ownership by minimizing the need to constantly replace damaged or slow devices.

At Panasonic Toughbook, we’ve developed our products to meet the needs of our customers. For example, the Panasonic Toughpad JT-B1features a daylight viewable screen, allowing mobile workers to clearly see critical data under bright sunlight to minimize errors.

In addition, the device also offers standard Bluetooth, 802.11 a/b/g/n Wi-Fi, GPS, and optional integrated 3G mobile broadband, and NFC capabilities providing the ideal device for mobile workers.

The Connected Employee Smart devices are proliferating and we’ve seen the data to prove it. Gartner suggests that by 2017, half of employers may impose a mandatory BYOD policy – requiring staffs to bring their own laptop, tablet, and smartphone to work. Instant access to information and services has changed the way we work, and our expectations of devices. With increasingly more workers in the supply chain on the move, the ability to remain connected is crucial in mission critical tasks.

Devices that offer Bluetooth, Wi-Fi, Global Positioning Satellite (GPS), and Near Field Communications (NFC) will not only ensure constant connectivity but also synergy with existing technology infrastructure.

Paired with lightweight, longer battery life devices, the possibilities are incredible and the opportunity is huge.

The Security Aspect Over the last few years, consumer devices have overtaken enterprise devices in a lot of ways.One of the most common feedbacks I’ve heard time and time again from our customers on mobility is their concern around security.

I believe the reason they have this concern is that businesses tend to make the mistake of adopting consumer devices for enterprise use.

The biggest issue with this approach is that these consumer devices are not meant for business use, especially with the lack of security features. Essentially, enterpriseclass mobile computing requires an enhanced level of device security that is not available in today’s tablet market.

To address this need, the Panasonic Toughpad JT-B1 incorporates security features embedded physically into the device and offers LOGISTICS TIMES September 2013

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hardware and software encryption, IPsec, VPN, root protection, trusted boot, as well as device management. This ensures the device is compliant with FIPS 140-2 for use in government departments and regulated industries like financial and healthcare institutions.

Compatibility with world-class Mobile Device Management (MDM) tools are also available to allow IT managers to manage applications, secure devices from unauthorized use, and perform many other tasks.

What’s Next?

Upon selecting the appropriate technology, the next logical step would be to begin developing a deployment plan. The key thing to remember with technology that enhances productivity is that they’re just that: tools.

At Panasonic Toughbook, we believe in including employees into the overall process as we see them as a critical step to the overall success of the device implementation. We’ve established some best practices to streamline the deployment process to ensure a smooth and positive rollout. Here are three practical handles for IT decision makers to consider as they look to integrate new technologies.

Pilot Program Initiating a small pilot program with a select group of users can be valuable. They can get a feed of the workflow with the possible devices and communicate their feedback. Tracking key information, such as number of repairs/service calls per day or turnaround times, during the pilot phase will help earn management, financial buy-in, and acceptance from the larger team.

This approach also helps identify potential issues and provides the necessary lead time to iron these issues out before the project goes ‘live’. This is critical as any downtime during the ‘live’ phase will serve LOGISTICS TIMES September 2013

to defeat the original intention of implementing the new device into the workflow.

Business Partnerships Meaningful partnerships are the foundation for success. Partnerships are what enable many companies to make continuous improvements.

Through partnerships, businesses will have the ability to direct their resources and capabilities to high priority projects.

Choose partners that will provide support and services once the technology is in the field. As with any new rollout, it will take time for the devices and associated software to be fully accepted and usable. Partners that provide onsite assistance and support after the initial purchase will significantly reduce the time your IT department spends training and assisting workers with technology transitions.

Partnerships can also provide key insights based on their previous experiences that will serve to enhance and catalyse the process of the overall implementation.

Comprehensive Training Once you’ve selected the best solution, prepare a detailed rollout plan that includes employee training.

Without the proper training, we find users often don’t use the technology to its maximum potential. To get the most out of your investment, we recommend choosing a day and time to roll out the solution to the entire team. During this training, use advocates of the technology to share success stories from the pilot program and share the key improvement metrics that you captured and quantified. Using the participants from the pilot program to engage their peers will help create excitement and lower resistance to the new processes.

With any technology investment, you are purchasing a solution, not individual devices. Without training

and acceptance from your workforce, you’ll likely be facing an uphill battle.

Engaging your field workforce early on and listening to your employees’ needs will create interest in the new solution and expedite your return on investment.

Opportunity for Value Creation By integrating these best practices into their mobility model, businesses could reduce operational spending, encourage broad participation, respect employee privacy and personal experience, without compromising on security and compliance or driving up support costs.

In a constantly changing business landscape with increased competition, businesses run the risk of falling behind or losing their competitive edge. With these practical handles on selecting the appropriate devices and deployment strategies, we believe these approaches will allow businesses to tap into this trend to differentiate themselves from their competitors, creating an opportunity for value-creation rather than cost minimization while meeting their overall business objectives.

People, Processes, Technology The root of the word technology means to shift or to change, and was used originally in relation to changing nature. Today, we think of technology as being about electronics but I believe that businesses should view technology as an accelerator, a means to an end, and not the end itself.

Panasonic Toughbook believes the key to business excellence is to focus on people, processes, and technology. Through utilizing the most appropriate device for the industry, the synergy between people, processes, and technology and will help businesses thrive and avoid the coffee, shoe, clothing store transition.

GANDHI ROLLING SHUTTERS - QUALITY ENGINEERED Gandhi Automations is the only manufacturer of Rolling Shutters certified to ISO 9001- 2008 quality management system. This has resulted in the implementation of continuous improvement in personnel training, production, inspection, equipment calibration, machinery maintenance, logistics and customer relations. The product engineering team uses the latest software combined with technologically advanced machinery to offer to the customer a well-engineered product. Over years of meticulously working on the design, fabrication and installation, Gandhi Automations has developed technical expertise in manufacturing various kinds of Automated Rolling Shutters. The Research and Development team with its extensive know-how and experience are able to produce specific types of Rolling Shutters unique to certain sites and client requirements. A consistent quality product has thus become the hallmark of Gandhi Automations' manufacturing process right through installation to after sales service.

Gandhi® Rolling Shutters are ideal for situations where side room is at a premium and security is required.

Our Rolling Shutters require very little headroom above the structural opening. They combine strength with elegance along with durability and are designed for both external and internal applications. Gandhi® Rolling Shutters are fabricated of interlocking Galvanized Insulated and Non Insulated, Stainless Steel, patented Aluminum or Polycarbonate slats and patented MS Rolling Grills.

Each of our Rolling Shutters is designed to the clients' specifications conforming to IS 6248 and solidly constructed to promote trouble-free operation and long life.

Gandhi ® Rolling Shutters fit openings to a maximum width of 30,000 mm and height of 40,000 mm with an endless array of options to satisfy both aesthetic consideration as well as working requirement.

For further details, Contact: Gandhi Automations Pvt Ltd, 2nd Floor, Chawda Commercial Centre, Link Road, Malad(W) Mumbai – 400064, Off : 022- 66720200/66720300(200 lines), Fax : 022-66720201, Email :- sales@geapl.co.in, Website : www.geapl.co.in LOGISTICS TIMES September 2013

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EVENTS

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Solution for skill gap Million Minds Management Services organized a meeting of the training and placement officers of management colleges and the industry stalwarts in Delhi on 10th August 2013 at CRWC. The topic of discussion was “Opportunities for young professionals in the logistic industry”. The training and placement officers represented the student community and put forward the students’ perception about the logistics industry. The meeting witnessed interactive session between stalwarts and TPOs about various ways and means for better placement of management students in logistics industry to fill up the future leadership of the industry.

LOGISTICS LOGIST STICS TIMES September 2013

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2011-13